Coyote Blog

Via the WSJ today

Amazon.com on Tuesday said it was raising the minimum wage it pays all U.S. workers to $15 an hour, a move that comes as the company faced increased criticism about pay and benefits for its warehouse workers.

The new minimum wage will kick in Nov. 1, covering more than 250,000 current employees and 100,000 seasonal holiday employees. The company said it also will start lobbying Congress for an increase in the federal minimum wage, which was set nearly a decade ago and is currently $7.25 an hour.

“We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” said Jeff Bezos, Amazon’s chief executive, in a statement. “We’re excited about this change and encourage our competitors and other large employers to join us.”

Here is the cynical view of this:  Amazon likely is being pressured by the tightening labor market to raise wages anyway.  But its call for a general $15 minimum wage is strategically brilliant.  The largest employers of labor below $15 are Amazon's retail competitors.  If Amazon is successful in getting a $15 minimum wage passed, all retailers will see their costs rise but Amazon's competition will be hit much harder.

(Source)

The reason is that due to its internet sales model, Amazon's revenue per employee is MUCH higher than for most retailers -- you can see this in the chart above in a comparison to Sears.  If we had data on revenues per employee in small retail, the numbers would be even lower.  So a minimum wage increase raises costs to Amazon's competitors by a much larger percentage of revenue than it does for Amazon.  In short, Amazon's cost advantage over bricks and mortar retailers would be enhanced by a $15 minimum wage.

Jeff Bezos is apparently crowdsourcing philanthropy ideas from the public at large.  I wish him well, and hope he finds some interesting and useful outlets for his excess cash.  I would however encourage him to find something whose model can grow and still remain robust.  I have found that there are many charitable activities that work great because of the passion and vision of one person, but are not easy to grow (many examples of local successful public school reforms fall in the same category).  If Jeff Bezos gives money, a charity is likely to see a huge increase in resources, both from Bezos's money and, because his decision is going to be public and high-profile, from money from others who donate because Bezos did.

Any decision he makes will likely be more to satisfy his inner need to be involved with something new and different rather than the optimal approach to help the maximum number of people.  Because he is presumably uniquely good a creating businesses, probably the best way for him to maximize the use of his money and time in improving the lives of a maximum number of people is to go start another business.  Certainly Amazon has created value for the rest of us that dwarfs the amount he has earned from it.  Taken another way, via Amazon he has hugely improved the lives of many, many people and in turn taken just a small commission for himself on this value created. He has lowered prices for us, he has saved us time, he has brought us many more choices.  He has created a platform for small businesses to sell their product that they could never duplicate themselves.  He has nearly single-handedly created the self-publishing business and provided an outlet for a ton of new authors (myself included).  He helps keep Apple and Google honest (and vice versa) from his competition with them.

Of course, he is likely tired of doing only this kind of stuff so he wants to do something more traditionally charitable, and that is fine, but I am exhausted with the notion that charity helps people but business and commerce do not.  Learning from this, one decision criteria might be that he looks for something that not only needs his money, but needs his expertise and vision as well.  The latter is likely way more valuable than the former.

If I had a billion dollars for philanthropy, I might start a new university with a totally new approach.  I would call Brian Caplan and I'd see if we could build a curriculum and an entire educational approach out of engaging multiple perspectives on each issue.   Admissions essay question #1:  "Tell us about a time you encountered a perspective or opinion on an issue very different from you own and tell us how you responded."

Last week, I pointed out that my alma mater Princeton had again topped the USN&WR college rankings.  But those college rankings were for those who wanted to invest their tuition money and four years of their life at the school that would, you know, educate them the best. 

If, however, you would rather choose a college based on how well it serves everyone else's interests rather than your own, you can use this ranking from Washington Monthly, presumably chosen with help from special correspondent Ellsworth Toohey.  Universities are chosen for social contribution and research and number of Peace Corps volunteers and the like.  No indicators of educational quality or student satisfaction are used.  Really, they don't seem to be joking:

U.S. News & World Report publishes its university rankings
every year, and every year people complain about them. So starting in
2005 we decided to do more than just complain, and instead came out
with our own rankings "” based not on reputation or endowment size, but
rather on how much of a contribution each university actually makes to
the country.

Top universities on the list presumably teach important skills like:

• How to find a job that helps lots of people but doesn't pay very much and provides no job satisfaction
• How to find a boyfriend who beats you a lot and never can hold a job, but needs your financial support really badly
• How to invest in companies with no prospects but who need the money very much (taught presumably by Eugene Lawson)

In this list, a Peace Corps volunteer is ranked to have made a larger contribution to America than say:  Jimmy Stewart, Meg Whitman, Jeff Bezos,  James Madison,  etc.  (Oh, and Pete Conrad, probably my personal favorite Princeton Grad, and first man on the moon after Neil Armstrong's dress rehearsal on a Hollywood soundstage with Buzz Aldrin and OJ Simpson.)

This is maybe a great list if you have a billion dollars burning a hole in your pocket and want to find a university to endow, but of what utility is this for prospective students?

Postscript: You do, though, have to give Washington Monthly props for putting Texas A&M at the top of their list, a university whose student body is probably least likely of almost any major state school to purchase very many copies of their magazine  [a comment on their political orientation, not their ability to read].

Update: OK, this is how people REALLY pick schools, from this list.